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Soulbound Tokens vs Self-Sovereign Identity: Web3’s Search for a Digital ID Solution

Last updated: | 5 min read
Source: AdobeStock / starlineart


Fraser Edwards is the Co-Founder and CEO of cheqd, a network for creating digital credential businesses.

In the recent research paper titled ‘Decentralised Society: Finding Web 3’s Soul’, Ethereum (ETH) co-founder Vitalik Buterin, alongside authors Glen Weyl and Puja Ahluwalia Ohlhaver, introduced the concept of ‘Soulbound Tokens’ (SBTs) as a brand-new take on digital identity. The paper speaks about the importance of digital identity within Web3 and meeting the hyper-financialisation of Web3 with equal amounts of trust and social relationship building. 

We, however, couldn’t help but notice how close SBTs’ use case is to what self-sovereign identity (SSI) is doing. SSI is already paving the way towards creating a trusted society. We wanted to compare Vitalik et al.’s Soulbound tokens hypothesis against SSI to see which one carries the most validity as we enter Web3.

In their simplest form, soulbound tokens are non-transferrable fungible tokens that can be displayed in a digital wallet. These tokens are issued by one soul (individual) to another. They cannot be traded with anyone else. Once an SBT is obtained, it is bound to that person, hence the name soulbound

SSI uses the relationship between issuers, verifiers, and holders of data to create a user-centric model. In this model, the holder has the option to share with the verifier the exact information they need (and not more). The verifier can then cross-reference the information with the issuer’s signature (sometimes stored on a blockchain) to ensure the holder’s data is valid. 

The draw to SBTs is their non-transferable nature, they are bound to their recipient. They could be used for declaring credentials and forming an online identity on behalf of their owner. Similar to a set of scout badges, you could have multiple SBTs for various credentials, ranging from a driver’s licence to a token that represents a concert ticket.

On the other hand, SSI differs in that their default visibility is private and off-ledger, whereas SBTs are proposed as public and on-ledger by default. 

SSI focuses on allowing the user to take control of their data and hold issued documents in a private digital wallet. The default private mode gives the holder more control over their personal data and how it is accessed.

SBTs vs NFT vs SSI

As an identity solution, SBTs function similarly to a non-fungible token (NFT). The key difference is their lack of transferability. SBTs are being built now, yet fall at one key hurdle: privacy.

SBTs are a way of expressing oneself in Web3, similar to the ownership of crypto and NFTs. However, they could replicate a lot of the current identity issues faced in the modern day onto a new public and immutable platform, which is the main drawback of SBTs.

There is tension around the creation of SBTs, with some parties concerned that it may create a public system of social merit, similar to the China social credit system. There are fears that if widely adopted, the achievements and mistakes we make in the real world could equate to an SBT related to that action. This would create a ledger of every achievement and mistake made, with no trade function, for life. 

SBTs, in this sense, are not immune to human error; there is the potential for issuers to send SBTs to the incorrect holder, which can open the solution up to a number of privacy issues. There has already been a case whereby an individual created an ‘Asshole SBT’, a token that uses the same technology as an NFT but can be sent to an individual who can then only have it removed by paying a fee. This aspect of SBTs has the potential to cause great harm and could work to devalue Web3’s soul.

SSI exists to address the key identity issues currently faced in a digital-centric society. By creating a system where the user controls their data and has a right to send it to whomever they wish, we begin facilitating true data ownership as a societal norm. Data transactions between companies and individuals could become as simple as messaging. By not making an inherently public-facing identity system, SSI can address data theft and centralised data silos without any ambiguity between the issuer and the holder.

SBTs are built upon pre-existing Web3 concepts such as NFTs, which gives them a strong path for adoption by the community, especially since developers are comfortable with the tooling. However, as communities begin to grasp the public nature of SBTs and the privacy issues this creates (e.g. traceability of online behaviour), they will begin looking for privacy-preserving alternatives.

On the other hand, SSI has seen a keen adoption from universities in recent years and has a strong market for adoption amongst governing bodies, especially given recent events such as COVID-19. This interest in SSI is already beginning to grow in momentum, with the EU commission proposing that all Europeans should have a secure form of digital identity. This level of government adoption will benefit SSI in its further expansion into key global sectors such as education and healthcare.

SBTs and SSI are both gaining publicity for solving Web3’s current identity disorder. SBTs seek to leverage the community’s familiarity with NFTs to secure quick and seamless adoption. However, SSI looks to address these issues with privacy-focused technology, which has been developed over years of research. Still, both systems have the potential to add value to our digital lives. Nonetheless, SSI is the only one that digs deep enough to solve issues surrounding identity and privacy to allow Web3 to be truly adopted by the masses and put us at the centre of our own ecosystems.


Learn more: 
– Ethereum’s Vitalik Buterin Lists ‘Worthwhile’ Ideas for Developers to Work On
6 Key Points in Vitalik Buterin’s Vision for Ethereum Presented at EthCC 

These Are Some Topics Ethereum Developers Disagree With Vitalik Buterin On
Crypto in 2022 Will Bring New and Older Emergent Trends to the Fore

Where Do We Stand on Self-Sovereign Identity?
Soulbound Tokens – The Future Of NFTs

How Soulbound Tokens Could Reduce Speculation and Improve DAO Voting
Soulbound: On or off Chain? Vitalik Buterin vs Evin McMullen